Stay or go?

Every time I think I’ve got my head around the pernicious impacts of the bedroom tax something new emerges to make me think again.

The trigger this time is an excellent report from Aragon Housing Association on the first 100 days of what the government calls the spare room subsidy. But that also sent me back to several conversations I had at the CIH conference in Manchester and reports published while I was on holiday from the National Housing Federation (twice), Chartered Institute of Housing and Convention of Scottish Local Authorities.

Even before that the evidence was accumulating from around the country that the effects are at least as bad, and probably worse, than most people expected or feared. From rent arrears in Newcastle and Ayrshire to fears of more suicides in Birmingham to criticism of the Labour leadership’s stance on the issue in Liverpool, the effects of the bedroom tax continue to be felt emotionally, financially and politically.

Aragon’s study caught my attention because of its dispassionate tone and the way it focuses in on the impacts on one relatively small organisation. It currently believes that 461 of its 6,500 tenants are affected and that they face an average shortfall of £18.01 per week.

As elsewhere, they essentially face a choice between trying to stay in their home and trying to move. Of the first group, 107 are living in specially adapted properties, protected for the moment by 26 weeks of discretionary housing payments.

Of the second, only 41 have managed to move to a smaller property in line with the stated rationale of the policy and bids for two-bed homes under the local choice-based lettings scheme are treble what they were last year.

Rent arrears rose by 9 per cent between the start of the bedroom tax in April and the end of June. However, most tenants had two rent-free weeks at the start of April and the increase since then is 24 per cent. The number of tenants affected by the bedroom tax and in arrears has risen from 187 to 279.

Much of this will be familiar from around the country. But the report also has evidence of some knock-on effects of the bedroom tax that were not widely foreseen even in the welter of parliamentary and press attention over the last few months.

First up, as seen elsewhere, is the increasing difficulty of letting three-bed homes. Most bedroom tax victims are not the large families of media stereotype and cannot afford to pay a rent shortfall for the larger homes that were built as a matter of longstanding policy in the area.

However, the downsizing so far has had unpredictable results (at least they are to me). Under choice-based lettings, three of the three-bed homes had to be relisted because there was no suitable bidder for them. Of the 41 vacated larger properties, 15 have gone to Band 3 (low needs) priority applicants and seven have gone to Band 4 (no needs). Another 15 have gone in mutual exchanges. So much for the government’s argument that the bedroom tax will free up homes for desperately overcrowded families. That does not seem to apply even as close to London as rural Bedfordshire.

Voids of larger homes are an issue around the country. One landlord in the NHF Merseyside report saw its three-bedroom voids double in the first three months of the tax and another estimates each one costs £3,000 in repairs, lost rent and staff costs. As Inside Housing reported two weeks ago, some landlords in the North West and North East are already considering options including demolition of homes – something that would really put the government’s supposed aim of encouraging more efficient use of the housing stock into perspective.

Second, the dilemmas facing someone who decides to look at downsizing into the private rented sector are more acute than I had realised before. It’s clear that in most parts of the country that will mean trading security of tenure and a shortfall for a more expensive six-month tenancy that will cost the government more than it saves through the bedroom tax. However, in Bedfordshire and many other parts of the country it will also mean a shortfall for the tenant because of the way the local housing allowance (LHA) works.

Compare LHA rates and actual rents in the local area, and someone downsizing to a private rented home would face a £16.15 shortfall in Stevenage, £22.66 in Bedford and £29.35 in Milton Keynes. That Bedford shortfall is 15 per cent, which is more than the 14 per cent deduction for under-occupying by one bedroom under the bedroom tax. The net result would therefore cost the tenant more as well as the taxpayer.

Little wonder then that staying put and finding the money somehow looks like the best option for many people. Though Aragon operates relatively close to London, the largest town has 310 jobseekers and just 30 new jobs that became available in the first week of July. It’s also a rural area where, as MPs on the environment committee calling for a rural bedroom tax exemption this week recognised, communities face particular problems.

Like landlords all over the country, Aragon has put in place a whole range of measures to help, including advice on benefits, bills and employment, food parcels and food growing projects, working with a local credit union and IT training courses.

However, as the effects of the bedroom tax continue to work their way through the system the big question for landlords and tenants all over the country is when the next big change will come. At the moment, the impact is being financed by a combination of discretionary housing payments, tenants scrimping and saving and landlords incurring rent arrears.

Sooner or later tenants will have nothing left to scrimp and landlords will be forced to recover those arrears. I spoke to some in Manchester who anticipated their first possession actions this month for people who were already in arrears. It will take until the Autumn for bedroom tax shortfalls to reach the two month arrears threshold that can be the trigger for a Ground 8 claim. What will judges decide? How will local authorities respond to any homelessness applications by evicted tenants? And what will be the political impact of media coverage of evictions?

Sooner or later DHPs will run out and the delayed effects of the bedroom tax will start to play out. In many areas the most vulnerable under-occupiers, including disabled people living in specially adapted properties, are protected for now. Unless more money is found, or there are successful legal challenges, that will not last.

One potential piece of good news is that by October the universal credit will start to apply to some people with new and more generous rules on income from lodgers. What will be the impact of that? And of the combination of the bedroom tax with direct payment and the new accelerated recovery system for arrears revealed by Lord Freud in Manchester? Or his threats against landlords that reclassify their homes?

The pernicious effects of the bedroom tax will continue to play out in predictable and unpredictable ways.